Ontario Restaurant + Hospitality Chart of Accounts for Xero (Free)

Hospitality is the vertical where Canadian GST/HST coding gets genuinely tricky at the ingredient level: the flour and produce coming in the back door are zero-rated groceries, the plated meal going out the front is a 13% taxable supply, and a case of cola manages to be taxable on both trips. This Xero chart of accounts encodes those flips per account so an Ontario kitchen’s books stay right at line-entry speed.

The food-cost spine

Three cost accounts do the heavy lifting. Food stock and ingredients defaults to the custom Zero Rated rate, because basic groceries are taxable at 0% no matter the province, with ON - HST on Purchases listed as the alternative for the taxable exceptions: snack foods, carbonated drinks, prepared items bought in. Alcohol stock is its own account at 13%, and its note kills a persistent myth: resale stock earns a full input tax credit; the 50% rule belongs to entertainment spending, not bar inventory. Kitchen and bar equipment sits in fixed assets at 13% so the big-ticket ITCs and future capital cost allowance both have a clean trail.

On the revenue side, food and beverage sales default to ON - HST on Sales at 13%, which covers dine-in, takeout, and delivery of prepared food in Ontario.

Hospitality operating accounts

• Cleaning and laundry and smallwares and consumables at 13% with full ITCs; these run through hospitality books at a volume other businesses never see.
• Liquor and business licences on the custom Out of Scope rate: AGCO licences and municipal permits are regulatory charges, not supplies, so there is no credit hiding in them.
• Staff events and welfare keeps its 13% default with the 50% ITC caution attached, and the meals account carries the same flag for tastings and comps consumed rather than sold.
• Insurance stays exempt from HST while typically carrying Ontario’s 8% RST on the premium, a real cost with no recovery.

Before you import

Create the three custom 0% rates (Zero Rated, Exempt, Out of Scope) in Xero under the Tax menu, Tax settings, Tax rates. The Canadian edition seeds only the provincial purchases and sales pairs, and this chart’s zero-rated ingredient default cannot import until the rate exists. Then Accounting, Chart of accounts, Import. Xero fills each transaction line’s tax from contact first, item second, account third, so these defaults are the safety net under whatever POS or supplier settings sit above them.

Running it week to week

1. Keep supplier invoices split by account: produce and dry goods to ingredients, LCBO and brewery bills to alcohol stock, chemical and paper suppliers to their operating accounts.
2. Watch mixed invoices from broadline distributors; one delivery can legitimately carry zero-rated and 13% lines, which is exactly what the readable CSV’s alternatives column is for.
3. Reconcile licence renewals to Out of Scope so no phantom ITCs creep in.
4. Let the notes travel: the CSV is written to brief a new bookkeeper or manager without a meeting.

Post sales as a daily summary from the POS rather than transaction by transaction: one entry per day carrying the taxable total and its HST keeps the revenue account reconcilable to the POS report, and the tax collected ties out to the penny at filing time.

The daily paper flow of a restaurant is relentless, and every invoice is a small tax quiz. Hubdoc captures and archives the documents. ExpenseFlow reads each supplier bill line, splits zero-rated groceries from taxable items on the same invoice, codes licences and levies out of scope, and posts the result into Xero against these accounts. Dext keeps recurring distributor invoices consistent with supplier rules.

The same chart shaped for QuickBooks Online is at Ontario hospitality chart of accounts for QuickBooks, and the rates behind it are in the Ontario Xero tax rates reference.